To support corporate planning of communication programs appropriate to
company-specific voting decisions, including possible applications of the
processes addressed in its “E-Meetings”
public interest program, the Shareholder Forum conducted an independent
survey of professional investors to determine (a) the situations that
actually justify their attention, rather than their reliance on
applications of standard policies, and (b) the means they prefer for
access to the relevant information.[1]

The survey sought more detailed views of the basic investor preference for
direct corporate management sources of information on voting issues, as
established by the Forum survey reported in December 2009.[2]
It was also designed for quantitative analysis of the generally assumed
investor inclination to allocate more time (cost) to voting issues in
proportion to the importance (value) of a decision, as illustrated in the
chart to the right showing a theoretical point of importance at which an
investor considers the cost of attention justified as an alternative to
simply relying upon proxy advisor recommendations or other standard
policies.

(1)a meaningful portion of professional fund managers can be expected
to allocate time to considering information provided directly by corporate
managers about voting decisions, as an alternative to simply applying a
standard policy;

(2)the percentage of investors who will allocate time to considering
voting issues increases significantly with the importance of the voting
decision; and

(3)management responses to specifically expressed investor interests
are the most highly valued means of providing information.

The charts below show that significant proportions of investors will spend
time – either “a few minutes,” “up to an hour” or “more than an hour if
needed” – to consider voting issues, as distinguished from applying
standard policies or recommendations,[3]
according to the importance of the decision. Participants were asked to
indicate how they would consider the same set of decisions first under
conditions “assuming that you are generally satisfied with a company's
performance and that there are no significant controversies about the
voting issues,” and then again under different conditions assuming the
investor has “significant concerns about a company's performance or that
there is some meaningful controversy or dissident challenge.”

The first of these charts compares the proportions of investors who would
spend any amount of time on each of the voting issues under routine (■)
and controversial (■) conditions:

The next two charts, below, present time allocation details of the same
responses, showing the proportion of investors who will spend either a few
minutes, up to an hour, or more than an hour to personally read or discuss
each type of decision, in both routine and controversial conditions:

1

Auditor ratification

2

Advisory endorsement of executive compensation policy

3

Approve stock plan for management compensation

4

Change in percentage of shareholder support required for
actions

5

Election of unopposed management nominees for board

6

Election with dissident nominees for minority of board
positions

7

Election with contested control of board

8

Merger proposal

It should be noted that there was an observable difference in the response
patterns for these questions between survey participants who reported
being responsible primarily for proxy voting and those who reported being
buy-sell decision-makers. Professionals with buy-sell responsibilities
were significantly more likely to allocate time to voting decisions, with
at least 70% of them reporting that under conditions of controversy they
would spend up to an hour or more considering information about each of
the listed issues other than auditor selection (#1) and change in voting
support requirements (#4).

Asked how they would be likely to allocate their time, survey participants
placed high values on presenting their own questions, both to company
managers and to others:

These responses also showed that investors will be likely to allocate time
to learning what issues are raised by others, including dissidents and
proxy advisors as well as other investors. There is an apparent
distinction, though, between seeking observers’ views to define issues and
seeking management’s responses to resolve those issues, evidenced by the
relatively high value attributed to simply reading the views of dissidents
(the second highest “top priority” rating, at 26%) and the low value
attributed to meeting with dissidents (the eighth of ten, with only 12%
rating it “top priority”).

Focusing on how companies could most effectively respond to these investor
interests in supplemental information, beyond the regulated disclosure
filings, survey participants expressed strong preferences for open, direct
exchanges with corporate managers:

It should be noted that there were significant differences between
responses from investors who were participating in the Shareholder Forum’s
program and the broader sampling of marketplace investors in their “ideal”
rating for “Discuss in pre-meeting open webcast with Q&A.” Among Forum
participants, who were more likely to have been aware of the “E-Meetings”
program’s discussions and reports about advantages of pre-meeting and
continuum communications,[4]
more than 39% rated the pre-meeting webcast exchange as “ideal,” and their
second highest level of “ideal” ranking was 20% for adding the
supplemental information to a relevant section of the company’s proxy
statement. The broader investor sampling, most of whom are assumed not to
have followed the Forum’s “E-Meetings” discussions, responded with only a
22% “ideal” rating of pre-meeting webcast exchanges – still the top choice
– with the second highest “ideal” rating being 17% for discussion at the
annual meeting.

Addressing the annual meeting itself as an opportunity for management
response to investor questions, a remarkable 42% of participants
considered this traditional process for shareholder communication to be
“useless.” It is important to observe, though, that while getting twice as
many “useless” ratings as any other process, the annual meeting discussion
also received a relatively high, third-ranking 16% level of “ideal”
ratings. This suggests strong investor support for any form of direct
management question-and-answer exchange, even after decisions have been
made.

Finally, it may be useful to compare the investor ratings of the various
open discussion processes with their ratings of the various written means
of providing information. While open discussion processes generally
received more “ideal” ratings, the written responses such as SEC filings
received the highest proportions of “effective” or “reasonable” ratings.
The highest combined “effective” and “reasonable” rating, in fact, was for
the alternative of presenting information in a separate summary section or
appendix to a company’s proxy statement, even though that process received
a barely second-to-last 5% “ideal” rating. However this pattern of
preferences is interpreted, theoretically or as refined in
company-specific surveys, it suggests a need to develop communication
plans using both discussion and written processes to effectively reach all
of company’s shareholder decision-makers.

* * *

Questions and requests for more detailed analyses of investor responses
will of course be welcomed.

We thank all the survey participants who offered their views, and all of
the Forum participants who contributed their time and expertise to guide
this project.

Eric Nowak, Swiss Finance Institute and European Group for Investor
Protection (egip)

David A. Silverman, Blue Harbour Group and New York Society of
Security Analysts (NYSSA)

Timothy Smith, Walden Asset Management

Frank G. Zarb, Jr., Katten Muchin Rosenman LLP

[1]
The survey was initiated on August 19, 2010, with Forum email
invitations to its program participants and a list of approximately
five thousand professional investor users of research. Copies of the
invitations and the questionnaire are available from these links:

[3]
Asked how they would reach a voting decision on each of the listed
subjects, participants were given choices that included the stated
different levels of their time to consider the issues as well as the
following alternatives: “support management position,” “follow proxy
advisor recommendation,” “follow another investor's decision,” or
“apply my own firm's standard policy.”

This Forum
program is open, free of charge, to anyone concerned with investor interests
in the development of standards for conducting shareholder meetings
with electronic participation. As stated in the posted
Conditions of Participation,
the Forum's purpose is to
provide decision-makers with access to information and a free exchange of
views on the issues presented in the program's Forum Summary. Each
participant is expected to make independent use of information obtained
through the Forum, subject to the privacy rights of other participants.
It is a Forum rule that participants will not be identified or quoted
without their explicit permission.

The organization
of this Forum program was encouraged by Walden
Asset Management, and is proceeding with the
invited leadership support of Broadridge Financial Solutions, Inc. and
Intel Corporationto address issues relevant to broad public interests in marketplace
practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can
provide both expertise and examples of leadership relating to
the issues being addressed.

Inquiries about this Forum program and requests to be included in
its distribution list may be addressed to
e-mtg@shareholderforum.com.

The information provided to Forum participants
is intended for their private reference, and permission has not been
granted for the republishing of any copyrighted material. The material presented on this web site is
the responsibility of
Gary
Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™
is a trademark owned by The Shareholder Forum, Inc., for the
programs conducted since 1999 to support investor access to
decision-making information. It should be noted that we have no
responsibility for the services that Broadridge Financial
Solutions, Inc., introduced for review in the Forum's
2010 "E-Meetings" program and has since been offering with the “Shareholder
Forum” name, and we have asked Broadridge to use a different name
that does not suggest our support or endorsement.